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SPY Rose 0.6% as Oil Prices Changed Direction

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Jan. 22 2016, Updated 3:39 p.m. ET

SPY up 0.6%

The SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 3X ETF (SPXL) marched upwards on Thursday, January 21, 2016, registering 0.6% and 1.2% gains, respectively. The rebound in the US stocks is largely attributed to the lift in oil prices. From its record lows, the US crude prices jumped 4.2% to settle at $29.53 per barrel on Thursday.

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Market overview

The above graph presents a market snapshot on January 21, 2016. Here, the US dollar is represented by the PowerShares DB US Dollar Bullish ETF (UUP), oil is represented by the United States Oil Fund (USO), and gold is represented by the SPDR Gold Trust (GLD). The Treasury bond market is represented by the iShares 20+ Year Treasury Bond (TLT) while volatility is represented by the Volatility S&P 500 (VIX).

The US equities’ downward trend took a pause on Thursday owing to the lift in oil prices as well as the prospects of monetary stimulus from the European Central Bank and the People’s Bank of China. Investors are looking forward to such measures in hopes they will reduce financial turmoil.

Oil prices got a boost on the day after the oil supplies figure was not as extreme as estimated. US crude rose 4.2% to close at $29.53 per barrel while Brent crude went up 4.9% and settled at $29.25 per barrel. This boosted energy-related stocks. Kinder Morgan (KMI), Oneok (OKE), Devon Energy (DVN), and Denbury Resources (DNR) rose 15.6%, 12.9%, 12.0%, and 16.7%, respectively, on January 21. Taking cues about the prospects of fresh stimulus measures, investors opted for riskier assets like equities and demanded less of safe havens like the US Treasury bonds. As a result, yields rose with the fall in bond prices. Gold went up despite the decrease in volatility.

In the next articles, we’ll look at the performances of the component sectors of SPY on January 21.

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